OTTAWA (Reuters) - Resales of Canadian homes rose 1.3 percent in March from February as gains in Ottawa and Montreal helped offset declines elsewhere, but recent mortgage rule changes have left both buyers and sellers uncertain, the Canadian Real Estate Association said on Friday.
The industry group said actual sales, not seasonally adjusted, fell 22.7 percent from record highs a year earlier, while the group’s Home Price Index was up 4.6 percent from March 2017.
CREA’s Chief Economist Gregory Klump said the mortgage rule changes were taking some buyers out of the market - and pushing those who still qualified into lower-priced homes. Condo sales and prices have been booming while detached homes have slumped.
“Recent changes to mortgage regulations are fueling demand for lower priced homes while shrinking the pool of qualified buyers for higher-priced homes,” Klump said in the report.
New and tougher rules on mortgage lending were imposed Jan. 1 amid fears of a housing bubble, requiring lenders to “stress test” borrowers to ensure they could withstand higher interest rates. The changes mean fewer buyers qualify for loans.
The CREA report said March sales were up in over half of all housing markets, led by Ottawa and Montreal.
The housing market in Toronto, Canada’s largest city, and nearby cities cooled dramatically last summer after the province imposed new measures to curb speculation, including a foreign buyers tax, but regained some strength by the end of the year.
Still, CREA warned data for the “greater Golden Horseshoe” area around Toronto will look bad for a while yet: “Although home prices in the region have stabilized or begun to show tentative signs of moving higher in recent months, year-over-year comparisons may deteriorate further due to rapid price gains one year ago.”
The report showed the national sales-to-new listings ratio eased to 53 percent in March, close to the long-term average and near the middle of the 40-to-60 percent level that represents a balanced market.
While CREA’s home price index showed national prices still up from a year earlier, the national average price was down 10.4 percent from March 2017 at C$491,000 ($389,930). The average price is heavily skewed by sales in the more expensive Toronto and Vancouver markets, which have seen the biggest cooling.
Reporting by Andrea Hopkins and Fergal Smith; Editing by Bernadette Baum